Krakow is the strongest tourism brand in Poland, a Central European business services hub and the leader among Polish regional cities in terms of office stock. However, despite its strengths, this vibrant business location was also hit by the consequences of global turmoil in the past three years. According to Krakow IT Market Report 2023 published by MOTIFE in partnership with Cushman & Wakefield, occupier activity began to recover in the Krakow office market about a year ago. Its recovery will be further driven by the employment growth generated by IT companies and nearshoring. In 2022, 40 new Ukrainian companies registered in Krakow following the relocation of their operations to the capital of the Małopolska region, reveals the report.
Companies appreciate Krakow’s diversity
Total prime office stock in Krakow stands at almost 1.8 million sq m. The Krakow market provides a large variety of diverse office options, including large complexes with a capacity of 5,000+ people such as Fabryczna Office Park, High5ive and Quattro Business Park. There are also smaller buildings offering a more private experience, historic houses in the Old Town or industrial buildings in post-industrial areas. This broad offer is being appreciated by a growing number of tenants entering the Krakow market such as high-tech companies and start-ups looking for locations with a unique vibe that will support recruitment processes,
comments Dariusz Madej, Associate, Cushman & Wakefield.
Employment in the Krakow tech sector grows by approximately 10% every year. This trend is driven by both continued expansion of the existing players and the arrival of new technology companies. It is also worth noting that 40 new Ukrainian IT companies registered in Krakow last year among which are those who relocated part of their operations to the capital of the Małopolska region. The continued growth of the IT sector as well as the acceleration of the “return to the office” trend are also an incentive for property developers and investors to commence new projects in the city,
says Michał Piątkowski, CEO at MOTIFE.
After a period of muted activity in the flexible office sector in 2020, companies viewed such space with renewed interest in 2021. In the last 12 months, this trend intensified due to the need to optimise office maintenance costs and a growing number of Ukrainian-based businesses transferring their employees to Poland,
adds Jan Szulborski, Office Market Expert, Cushman & Wakefield.
Tenants are back
After two years of subdued demand, transactional activity bounced back last year, largely driven by companies which had put lease decisions on hold in 2020-2021. Throughout 2022, tenants leased nearly 200,000 sq m in Krakow, an increase of 25% year-on-year. This result was close to pre-pandemic levels. It is also notable that new leases and expansions accounted for over 70% of total take-up. In the first quarter of this year, tenants signed leases for more than 38,000 sq m. Office demand in Krakow is expected to continue its upward trend this year,Â
comments Michał Galimski, Partner, Head of Regional Markets, Cushman & Wakefield.
Rents are the highest in the city centre – no surprise
Office rents are expected to remain under upward pressure especially in office buildings in central locations. Rental growth will, however, depend on a number of factors including planned development projects, land availability and the macroeconomic situation. Krakow is a strong business brand, which is expected to contribute to stability in its office market,
adds Dariusz Madej.
High vacancies? Only for a while!
The high availability of office space in Krakow will, however, be short-term due to a reduction in the number of new projects scheduled for completion in 2024-2025 and the gradual recovery in transactional activity. The vacancy rate is expected to edge down again in the coming 12 months, with the office absorption rate likely to incentivize developers to launch new projects for delivery in 2025-2026,Â
concludes Jan Szulborski.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more. For additional information, visit www.cushmanwakefield.com.